Isra-Mart srl:Updated: DECC reveals crippling cuts to solar feed-in tariffs

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The government has today confirmed it plans to impose deep cuts in the level of incentives available to solar photovoltaic installations with over 50kW capacity, prompting outrage amongst many solar developers who fear large solar farms and rooftop installations will become financially unviable.

The consultation, which has been anticipated since the government announced early last month that it was ordering a fast-track review of the level of feed-in tariff available to installations with over 50kW of capacity, proposes a new tariff banding system for larger systems that would result in deep cuts to the level of incentives available.

Under tariffs currently due to come into effect next month, solar installations with between 10kw and 100kw capacity would received 32.9p/kWh through the feed-in tariff scheme, while larger installations with between 100kw and 5MW capacity would receive 30.7/kWh.

However, under the proposals contained in the consultation installations with 50kW to 150kW will receive 19p/kWh, mid-sized installations with 150kW to 250kW capacity will receive 15p/kWh, and solar farms with between 250kW and 5MW will receive just 8.5p/kWh.

If adopted the proposals would mean a large rooftop installation on a school or office with 100kW capacity would see available incentives cut 42 per cent, while solar farms with up to 5MW such as many of those planned in the south west will see incentives slashed by 72 per cent.

The deadline for responses to the consultation is Friday 6 May and the Department of Energy and Climate Change said it would aim to finalise the changes in July and bring them into effect from August 1.

The proposals are likely to leave many within the solar industry furious after solar farm developers warned that such deep cuts will result in returns on investment that are so low it will be impossible for them to attract project finance. One industry insider described the proposed cuts as "horrendous", while Friends of the Earth said they were "very unhappy" with the scale of the cuts.

Meanwhile, some solar firms had hoped that the cuts would be limited to ground-mounted systems, protecting incentives for larger rooftop installations on schools, hospitals, offices and supermarkets. However, larger rooftop systems will also now face deep cuts that developers fear will undermine the investment case for such projects.

Speaking to BusinessGreen, Howard Johns, chairman of the Solar Trade Association, said the cuts were a "total disaster" and predicted that "scores" of community scale solar projects would now be axed.

The government defended the proposed cuts, insisting that the changes would simply bring the UK into line with the levels of incentives available to solar farm developers in Germany, France and Spain after those countries last year reduce the level of feed-in tariffs available.

But Johns rejected the parallels, noting that solar industries in Germany, France and Spain had enjoyed several years of higher tariffs to help them build up capacity and drive down costs. "70 per cent cuts on larger systems is totally out of kilter with anything that's happening in Europe," he said. "Everyone else in Europe has had time to build an industry - we've had 11 months. We've had all the uncertainty now followed by this... Cost reductions happen because of larger farms - you need a mix of sizes if the technology is going to expand"

In a statement, climate minister Greg Barker reiterated the government's view the reforms were essential to protect the amount of money available through the scheme to domestic installations - a position largely endorsed by those solar firms specializing in small scale rooftop installations.

"I want to make sure that we capture the benefits of fast falling costs in solar technology to allow even more homes to benefit from feed in tariffs, rather than see that money go in bumper profits to a small number of big investors," he said. "These proposals aim to rebalance the scheme and put a stop to the threat of larger-scale solar soaking up the cash. The FITs scheme was never designed to be a profit generator for big business and financiers."

According to the government, a solar farm gold rush is in the offing with 169MW of large scale solar capacity in the planning system - equivalent to funding solar panels on the roofs of around 50,000 homes if tariffs are left unchanged.

Barker also rejected accusations that the coalition was undermining investor confidence in renewable energy and damaging a successful scheme that would have delivered hundreds of megawatts of solar capacity over the next two years.